The SME, or small and medium enterprise sector, or small business loan sector, from a business finance perspective, is defined by different standards all over the world. Generally, here in the United States, a business is considered in the small business loan category if they have less than 100 employees, and medium if they have less than 500 employees. Businesses that have less than 10 employees are generally classified as SOHO's, or small office/home office based businesses. The SME is actually the largest group of enterprises all over the world, and makes up anywhere from 80-99% of business firms in almost every country in the world.

Even though this is the largest area of business, the financial support for these businesses is sometimes not there. Most financial advisors will agree that there just isn't the support base needed to serve this group of businesses, and there have been many debates on how to improve the service for this sector. SME finance is generally more strict than financing for larger corporations, but most lenders will break SME financing down into two different areas: collateral based and information based or unsecured small business loans.

Collateral lending is when the lender bases it's loans off of assets that the business has, contributions that the business receives, or uses factors to determine if they can loan the business money. These are usually the types of loans offered through traditional banks and other lending companies. Information based lending is when the lender bases it's loans off of information about the business, such as a financial statement, credit scores of the owner(s), relationship lending, and the business's venture capital.

Unsecured small business loans are the exact opposite, lenders loan these businesses money based on their performance as a business and faith that their financial history is good enough that they will, most likely, pay back the money. There is also alternative financing available, the most common of which is a business cash advance, or credit card factoring. The way this works is a credit card factoring company will look at a small business' credit card processing history and offer to buy that company's future credit card receivables at a discount. It is a very popular business right now, especially with the need for working capital being at a high and the avialability of traditional business loans being at a low.

While the SME sector is the largest in the world, there is still a large gap in the financing and most of these businesses will fail if they cannot gain access to the financing that they need. But, there is hope for these businesses. Companies such as Merchant Advisors are always there to lend a helping hand when a small business needs working capital or the money to grow their business. If your small business needs to find the working capital it needs, simply fill out one of our easy online applications and you will find that Merchant Advisors is always there to help.